With Mitt Romney, the former head of Bain Capital, running
for president in the U.S. elections, the private equity
industry is in the spotlight. And most firms are not enjoying
the attention. Theyre accused of buying businesses,
leveraging them up, cutting costs and outsourcing staff. And
while theyre ripping apart these companies, they are
delivering double-digit returns to their investors.
Jane Rowe, head of Teachers Private Capital, the $12.2
billion private equity arm of the Ontario Teachers
Pension Plan, doesnt have a problem with buyouts
generating great returns. Rowes only investors are
300,000 teachers, and private equity has been a significant
contributor to their pensions. Rowe isnt shy about
emphasizing the 19.3 percent return her group has returned
since its inception in 1991. Thats over 20
years, she says. 20 years, she repeats,
putting the fund, if it were independent, in the top quartile
of private equity firms.
Ontario Teachers has become synonymous with the
Canadian model of pension investing. Rather than hire money
managers in such areas as real estate, infrastructure, private
equity and publicly traded equities, Ontario Teachers has
brought investing professionals on staff and gives them the
authority to make deals without using intermediaries. Private
equity has been a big driver of the models success. At
the same time, Ontario Teachers uses funds in some areas
where it feels its more costly to do it itself.
Rowe joined the pension plan two years ago, after a 23-year
career at Scotiabank Group. She succeeded Erol Uzumeri, who
left Ontario Teachers to launch his own private equity
firm. Most recently, Rowe was responsible for the strategic
global management of workouts and retail credit risks across
Scotiabank. She had also held such roles as president and CEO
of RoyNat Capital, Scotiabanks midmarket merchant
Rowe came to Ontario Teachers after thinking about how
she wanted to spend the last 10 years of her career;
shes 55 now. The regulatory environment is
becoming more intrusive and here was an opportunity to work in
a less cumbersome environment at the pension plan, says
Rowe. She also believes that Ontario Teachers has a huge
opportunity in private equity now that banks are being forced
to shed these assets.
About half of Ontario Teachers Private Capital assets
are allocated about evenly between private equity funds
investing in emerging markets, North America and Europe. The
other half is invested directly in portfolio companies and
alongside private equity firms in what are called
co-investments. The funds that Teachers chooses are
watched closely by other investors. We work with funds
that we hope will think of us as a co-underwriter, she
says. Theyre an extension of us. So they have to be
very good. Among Ontario Teachers portfolio
companies are GNC, Serta and Simmons. Fund partners include
Ares, SilverLake and Apollo. TPC has 70 direct investments, 48
co-investments and 44 mezzanine investments.
Ontario Teachers differs from other buyout groups in
that it has a permanent capital base so it doesnt have to
raise funds or plan an exit strategy from the start. We
dont take a three- to five-year view on something. We buy
it because we think its a great company to own, she
Rowe wants Teachers Private Capital to expand further
into Europe, even amid the continents debt struggles.
The displacement of capital markets in Europe will create
interesting investment opportunities for us, she says. In
July Ontario Teachers said it would acquire a majority of
Helly Hensen, a Norwegian designer of outdoor clothing. Jo
Taylor, who joined Ontario Teachers earlier this year to
head the London office and oversee private equity investing in
Europe, the Middle East and Africa, says the private capital
group is targeting iconic brands that have room for expansion.
Helly Hensen is a 130-year-old company with great
financial performance in key geographies. But they are absent
in others, says Taylor.
The pension plan also made a £73
million ($116 million) offer to acquire Goals Soccer Centres in
the U.K. Taylor says the five-a-side soccer company was an
attractive business to expand outside the U.K. But the offer
didnt go according to plan. Shareholders rejected the
pension plans bid in August because they found it too
low, even after the board approved it.
Taylor says he is looking at investments in the U.K., the
Benelux countries, Germany and Scandinavia. The beer
drinking countries as opposed to the wine tasting
countries, he quips. But what is more important is that
he wants companies with good management teams that can grow in
the current environment.
Teachers Private Capital also wants a bigger footprint
in the emerging markets, even though it invested in a
developing-world fund back in 1994. Additional investments in
Southeast Asia and India are of particular interest.